United States: Second Circuit Vacates Misbranding Conviction For Pharmaceutical Representative On First Amendment Grounds

Last Updated: December 7 2012
Article by John L. Brownlee and William F. Gould

John Brownlee is a Partner in our Northern Virginia office, William Gould a Partner in our Washington, D.C. office and Timothy Taylor an Associate in our Northern Virginia office

The Court's Decision Has Major Implications for the Pharmaceutical Industry

In United States v. Caronia, No. 09-5006-cr, slip op. (2d Cir. Dec. 3, 2012), the U.S. Court of Appeals for the Second Circuit held that "the government cannot prosecute pharmaceutical manufacturers and their representatives under the [Food, Drug and Cosmetic Act (FDCA)] for speech promoting the lawful, off-label use of [a U.S. Food and Drug Administration] FDA-approved drug." Slip op. at 51. Such speech, according to the court, qualifies as protected commercial expression, id. at 31, including the shield of heightened scrutiny against attempted restrictions, id. at 39. Following this conclusion, the court determined that the legal theory undergirding the government's prosecution failed to withstand this heightened scrutiny and that, therefore, the conviction at issue had to be vacated. See id. This decision has fascinating implications for pharmaceutical manufacturers, their employees and the medical industry as a whole, and it will certainly give federal prosecutors pause before bringing similar cases.1

A Long Time Coming

The Caronia case represents the latest chapter in the ongoing battle over the regulation of pharmaceutical company speech. As noted by the trial court in this case, the defendant's First Amendment challenge "rais[ed] constitutional issues 'very much unsettled, not only in this circuit but nationwide.'" Caronia, slip. op. at 19–20 (citing United States v. Caronia, 576 F. Supp. 2d 385, 403 (E.D.N.Y. 2008), vacated and remanded by Caronia, No. 09-5006-cr).

The unsettled nature of these issues was highlighted by the case's procedural history on appeal. The Second Circuit heard oral argument in the case over two years ago, on December 2, 2010. However, the court then requested supplemental briefing in light of Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (2011). Sorrell, decided June 23, 2011, struck down a Vermont statute restricting pharmaceutical manufacturers from using prescriber-identifying information for marketing purposes. The court held this to violate the Constitution's free speech protections. The parties completed their supplemental briefing in Caronia on August 29, 2011, and the Second Circuit's decision was published this week.

The Legal Framework: The "Off-Label" Paradox

At issue in Caronia was the government's prosecution premised on a particular construction of the FDCA and its implementing regulations. That legal framework, in a nutshell, is as follows. Before a drug may be distributed in interstate commerce, it must be approved by FDA for a specific use or uses. 21 U.S.C. § 355(a). Such approved uses are the only uses allowed on the drug's labeling. Id. § 321(m), (p). Despite this restriction, physicians may prescribe so-called "off-label" uses for drugs.

Even so, a drug is misbranded if "its labeling fails to bear 'adequate directions for use,' [id.] § 352(f), which FDA regulations define as 'directions under which the lay[person] can use a drug safely and for the purposes for which it is intended,' 21 C.F.R. § 201.5." Caronia, slip op. at 7 (second alteration in original). A drug's intended use can be manifested by, among other things, "oral or written statements" by a drug's manufacturer or other "circumstances that the article is, with the knowledge of such persons or their representatives, offered and used for a purpose for which it is neither labeled nor advertised." 21 C.F.R. §201.128. Intended use can even be shown, arguably, by a manufacturer's mere knowledge or notice that its drug is to be used off-label. Id. Thus, a manufacturer misbrands a drug anytime it intends a use for the drug — as manifested by its speech, by its conduct, or potentially even by its knowledge — which use does not contain "adequate directions" on its label. Id.

This scheme creates a paradox for drug manufacturers. On the one hand, "if a manufacturer knows, or has knowledge of facts that would give him notice, that a drug introduced into interstate commerce by him is to be used for [an off-label use], he is required to provide adequate labeling for such a drug [for that off-label use]." Id. On the other hand, the manufacturer cannot provide that labeling without FDA approval. See 21 U.S.C. §355(a). Thus, until Caronia, manufacturers were compelled to be silent about off-label uses or risk criminal prosecution.

The Facts of the Case

Turning to the facts of Caronia, the case involved the prosecution of two individuals and a pharmaceutical company for misbranding the drug Xyrem, a drug FDA approved for narcolepsy, but also used off-label in treating fibromyalgia and chronic fatigue. The prosecution was based largely on the defendants' alleged promotion of Xyrem for off-label uses. Alfred Caronia was employed by Orphan Medical, Inc., which is now Jazz Pharmaceutical, as a sales representative. Caronia, slip op. at 11, 13. Caronia managed a "speaker program" for Xyrem, in which a physician, Dr. Peter Gleason, educated other physicians about Xyrem. Caronia and Gleason were secretly recorded recommending off-label uses for Xyrem, and both, along with Orphan Medical, were charged under the misbranding provisions of the FDCA. Gleason and Orphan pled guilty. Id. at 19.

At trial, a jury found Caronia guilty of conspiracy to introduce a misbranded drug into interstate commerce. Id. at 24. The jury acquitted Caronia of the charge of misbranding. Id. His appeal followed.

Speech Is Speech

The Second Circuit vacated Caronia's conviction and remanded the case. Writing for the court, Judge Chin first discussed whether the government prosecuted Caronia for his truthful, non-misleading speech alone or whether the government used Caronia's speech solely as evidence of his intent to misbrand a drug.2 The prior may qualify for constitutional protection, while the latter may not.

The court held that, at least in this case, the government prosecuted Caronia for his speech alone. The court wrote, "[e]ven assuming the government can offer evidence of a defendant's off-label promotion to prove a drug's intended use and, thus, mislabeling for that intended use, that is not what happened in this case." Id. at 27–28 (footnote omitted). "Rather, the government's theory of prosecution identified Caronia's speech alone as the proscribed conduct."3 Id. at 32. The opinion thus leaves open the possibility that a prosecution may survive if it is premised on the idea that the promotion of an off-label use is evidence of an underlying intent to misbrand a drug. The Caronia court, however, seemed at least skeptical of that idea, see id. at 32, as well as the whole of the off-label regulatory scheme, see id. at 45–51; see also Caronia, dissenting slip op. at 8.

Sorrell: A New Framework

Having held that the prosecution was directed at speech itself, rather than an intent to misbrand as evidenced by speech, the Second Circuit then turned to whether the prosecution could withstand scrutiny under the First Amendment. In doing so, the court applied the framework established by Sorrell. In Sorrell, the U.S. Supreme Court first considered whether a government regulation of pharmaceutical manufacturer speech was content- and speaker-based. See slip op. at 36 (citing Sorrell, 131 S. Ct. at 2662–64). The regulation was, thus triggering a high level of scrutiny. Id. (citing Sorrell, 131 S. Ct. at 2662–64). The Supreme Court then concluded that under any heightened level of scrutiny, including the "intermediate standard" for commercial speech first established in Central Hudson,<4 the regulation failed. Id. at 36–37 (citing Sorrell, 131 S. Ct. at 2667).

The Second Circuit's application of Sorrell left little doubt as to the unconstitutionality of Caronia's prosecution. First, the court held that the government's construction of the misbranding provisions were content- and speaker-based. In doing so, the court pointed out the incongruity of the provisions. The government's construction was content-based because "speech about the government-approved use of drugs is permitted, while certain speech about the off-label use of drugs ... is prohibited, even though the off-label use itself is not." Id. at 40 (citing 21 U.S.C. §§331(a), 333(a)(2)). Likewise, the government's construction was speaker-based because "it targets one kind of speaker — pharmaceutical manufacturers — while allowing others to speak without restriction." Id. (citing Sorrell, 131 S. Ct. at 2663). "This construction 'thus has the effect of preventing [pharmaceutical manufacturers] — and only [pharmaceutical manufacturers] — from communication with physicians in an effective and informative manner." Id. at 41 (alterations in original) (quoting Sorrell, 131 S. Ct. at 2663).

Second, the court then held that the government's construction of its regulations failed the commercial speech test of Central Hudson.5 The court determined that the speech in question was neither misleading nor unlawful and that the government's interests in drug safety and public health, as implemented by encouraging manufacturers to apply for on-label drug uses, were substantial. Id. at 42–43. The court found, however, that the government's prosecution failed to materially advance that government interest and that the regulation was not narrowly drawn. Here, too, the court criticized extensively the incongruity of the off-label regulatory scheme. In examining whether the government's position furthered its public health interests, the court reasoned that, "[a]s off-label drug use itself is not prohibited, it does not follow that prohibiting the truthful promotion of off-label drug usage by a particular class of speakers would directly further government's goals ... ." Id. at 44 (citing Sorrell, 131 S. Ct. at 2668–69). Or, to put it more bluntly, "[t]he government's construction of the FDCA essentially legalizes the outcome — off-label use — but prohibits the free flow of information that would inform that outcome." Id. at 47. Similarly, when determining that the regulation was not narrowly drawn, the court reasoned that "[t]he government has not established a 'reasonable fit' among its interests in drug safety and public health, the lawfulness of off-label use, and its construction of the FDCA to prohibit off-label promotion." Id. at 50 (citing Bd. of Trs. of State Univ. of N.Y. v. Fox, 492 U.S. 469, 480 (1989)).

The Second Circuit then summarized its holding, emphasizing again that it had only held unconstitutional the government's construction of the off-label regulatory scheme, and not any statutes or regulations themselves. See id. at 51.

The Dissent

Judge Livingston dissented and accused the majority of "call[ing] into question the very foundations of our century-old system of drug regulation." Caronia, dissenting slip op. at 1. In a forceful opinion, she laid out a history of the FDCA's concern with the "intended uses" of health products, arguing that speech like Caronia's serves only as evidence of "an objective intent that the drug be used for [a particular] purpose." Id. at 12. According to Judge Livingston, if that purpose is not approved by the FDA, then the drug is mislabeled and a violation has occurred. "[T]hat Caronia was otherwise free to introduce Xyrem into interstate commerce does not give him a First Amendment right to introduce it into interstate commerce for any intended purpose he wished." Id. at 14. Judge Livingston then applied Sorrell and Central Hudson according to this understanding of the case and found that the government's construction of its regulatory scheme should withstand constitutional scrutiny. See id. at 19–30.

Looking Forward

Caronia is indeed a victory for pharmaceutical manufacturers and their representatives and for free speech. The opinion clearly holds that a misbranding prosecution cannot be premised solely on a manufacturer's truthful, non-misleading speech promoting a drug's off-label use. However, the opinion carefully avoided the bigger question: whether a prosecution may still use truthful, non-misleading promotional speech for an off-label use as evidence of an intent to misbrand. Thus, pharmaceutical manufacturers should still proceed carefully — but now, at least, so should federal prosecutors. 


1 Footnote 10 of the court's opinion warrants special attention from any prosecutor who practices regularly in this area because it addresses a major controversy in off-label regulation. Specifically, the court expresses skepticism that a manufacturer could commit a misbranding violation simply by supplying a drug with knowledge that it would be used for an off-label purpose.

2 He was joined by Judge Raggi. Judge Livingston dissented.

3 This was demonstrated by the government's actions at trial, which repeatedly attacked the promoting speech itself as the statutory violation while failing to distinguish between speech as speech and speech as evidence of intent. See id. at 27–31.

4 Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of N.Y., 447 U.S. 557 (1980).

5 The four prongs of that test are as follows:

First, as a threshold matter, to warrant First Amendment protection, the speech in question must not be misleading and must concern lawful activity. Second, to justify regulations restricting speech, the asserted government interest must be substantial. Third, the regulation must directly advance the governmental interest asserted to a material degree. A commercial speech regulation may not be sustained if it provides only ineffective or remote support for the government's purpose. Fourth, the regulation must be narrowly drawn, and may not be more extensive than necessary to serve the interest.

Caronia, slip op. at 37–38 (citations and internal quotation marks omitted).


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